TSD’s SBL Service

1. TSD’s SBL Service The 8th ACG Cross Training Seminar June 28, 2006 Busaba Kongpanyakul Business Development Department

2. Outline • Background of SBL in Thailand • Roles of TSD • Structure of TSD’s SBL Service • Service Scope • Taxes • Future Outlook

3. Background • Year 1999 • TSD assumed the role of the lender of last resort to prevent defaults in securities trading • Some securities companies obtained SBL license from SEC • Current market situation • Small volume of SBL transactions • Lack of supply • Few SBL licensees

4. Roles of TSD • Lender of last resort • Develop SBL Master Agreement • Service Utility for SBL intermediaries

5. Lender (TSD Member) Borrower (TSD Member) PHASE 1 Lender (TSD Member) Borrower (TSD Member) TSD (Intermediary Agent) Principal (TSD Member) Agent (TSD Member) Lender (Client) Borrower (Client) Lender (Client) Borrower (Client) Lender (Client) Borrower (Client) Lender (Client) Borrower (Client) PHASE 2 Structure of TSD’s SBL Service Principal (TSD Member) Agent (TSD Member)

6. Lender TRANSACTION Borrower Matching Confirmation Clearing & Settlement Collateral Mgt. Corporate Actions Reports Service Scope: Phase 1 TSD’s SBL Service

7. Participation • Qualified participants: TSD’s depository members • Apply for participation in SBL and receive an authorization from TSD • Comply with TSD’s rules and regulations of SBL transactions • Open SBL account and SBL collateral account

8. Types of TSD’s SBL Transactions • Settlement-Coverage Transactions • To prevent any default during the clearing and settlement process • Clearing House is the only borrower and acts as a principal • Put Through Transactions • TSD acts as an intermediary agent • All trade conditions are pre-negotiated between the borrower and the lender

9. Eligible Securities • Scripless form of the securities deposited at TSD • Except: • All kinds of warrants • Suspended stocks, posted “SP” • Stocks posted “C” (Compliance) • Debenture bonds • Thai Trust Funds • NVDR, DR

10. Eligible Collateral • Baht-denominated cash • Government bonds • Listed stocks in the SET • Letter of Guarantee

11. Collateral Management • Daily mark to market • Stocks: Last closing price announced by the SET • Bonds: Reference price announced by Thai BMA or BOT • Set haircut rates for each type of collateral • Handle margin calls • Eligible margin: baht-denominated cash only • Margin is kept and managed by TSD

12. Corporate Actions It needs to be paid to the original owner in full amount on the payment date. Cash/Stock Dividend The original owner indicates the intention to subscribe and pays subscription money to the other party at least 1 day before the deadline. The other party has to subscribe and deliver the securities to the original owner by the listing date. Rights Issue The original owner must recall or request for collateral substitution at least 4 days before the record date. Voting Rights

13. Taxes • Exempt taxes as follows: • Tax on income from transfer of loaned and collateral securities • Withholding tax on manufactured dividend/interest (for Thai or foreign juristic persons in Thailand)

14. Future Outlook • SBL transactions is expected to increase due to: • Development of derivatives market • Encouragement of regulators: • SEC decreases license fee from THB 100,000 to 20,000 and waives annual fee • Securities firms are allowed sell short • SEC plans to allow mutual & private funds to sell short

15. Thank You Busaba Kongpanyakul busaba@set.or.th